Page 28 - PRIAA Glossary

CLEARING
Post-trade activity where: 1) Trade details from both buyer and seller are matched 2) The central clearing counterparty (CCP) becomes the counterparty for both the seller and
the buyer in a trade. This helps to reduce the market
risk for trading firms; and 3) The CCP takes certain risk management steps like netting of trades to reduce total amount of cash flows.
CLEARING CONNECTIVITY STANDARD (CCS)
A free and public standardised data transfer format governed by ISDA to facilitate the reporting and clearing of over-the-counter (OTC) derivatives.
CLEARING HOUSE
A financial market infrastructure that provides clearing
and settlement services and ensures delivery of payments for its members’ transactions. Also referred to as a “multilateral clearing organisation”, “centralised” or “central counterparty”, “clearing association” or “derivatives clearing organisation” (in the United States).
CLEARING MANDATE
A mandate by the Dodd-Frank Act that certain over-the- counter (OTC) transactions be cleared by a derivatives clearing organisation (DCO).
CLEARING MEMBER
A member of a clearing organisation. Each clearing member must also be a member of the exchange. Not all members of the exchange, however, are members of the clearing organisation. All trades of a non-clearing member must be registered with, and eventually settled through a clearing member. In the case of over-the-counter (OTC) clearing, there are two types of clearing house memberships: direct and client cleared. Direct members must meet the central counterparty’s (CCP’s) membership requirements (e.g., a minimum size of trade portfolio, a minimum amount of tier 1 capital and a minimum credit rating) to qualify as a member of the CCP. A client clearing member usually cannot meet the CCP’s membership requirements and needs to clear through a direct member. A relationship must be
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